This week, Samantha Meiners, Justin Steinbecker, and Aaron Bahr explain how you can use a Traditional IRA for last-minute tax-saving deductions this tax season.

A new Tax Tip every Tuesday with Hawkins Ash CPAs. Your tax questions answered in under 60 seconds.

Hawkins Ash CPAs is a full-service public accounting firm providing individuals, businesses and organizations the services they need to save taxes, preserve wealth and maintain compliance. We have offices in Wisconsin and Minnesota.

#taxtiptuesday #tax #taxseason #shorts…(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

Tax Tip Tuesday #SHORTS: Last Minute Tax Saving Deductions – Traditional IRA

As tax season approaches its end, many individuals are looking for last-minute opportunities to reduce their tax liability. One effective strategy to consider is contributing to a Traditional Individual retirement account (IRA). Not only can this provide a tax-saving deduction, but it also offers long-term financial benefits. So, let’s delve into the details of the Traditional IRA and how it can save you some valuable dollars.

A Traditional IRA is a retirement account that allows individuals to contribute pre-tax income, meaning the contributions are deducted from their taxable income for the year. This not only reduces your taxable income but can also potentially lower the amount of tax you owe. Contributions are tax-deductible up to certain limits, depending on your age and income level.

The deadline for making deductible contributions to a Traditional IRA for the current tax year is typically the tax-filing deadline, which is April 15th, unless an extension is filed. This gives you a great opportunity to lower your tax bill, even if you haven’t made any contributions throughout the year.

For the tax year 2021, individuals can contribute up to $6,000 to their Traditional IRA, or $7,000 if they are 50 years of age or older, thanks to the catch-up provision. This means that if you’re below 50 and contribute $6,000, you can potentially deduct $6,000 from your taxable income.

Apart from the immediate tax deduction, Traditional IRAs offer additional benefits. The contributions grow on a tax-deferred basis, meaning you won’t have to pay taxes on the earnings until you withdraw the funds during retirement. This allows the investments within your IRA to potentially grow significantly over time.

Furthermore, Traditional IRAs can complement employer-sponsored retirement plans, such as a 401(k). If you already contribute to a 401(k) but still have some room within the contribution limits, a Traditional IRA can provide an additional avenue for saving towards your retirement.

It’s important to note that there are income limitations when it comes to deducting Traditional IRA contributions. If you’re covered by an employer-sponsored retirement plan, such as a 401(k), and your modified adjusted gross income (MAGI) exceeds certain limits, your ability to deduct the full contribution may be reduced or eliminated. However, you can still make non-deductible contributions to a Traditional IRA, which can offer tax advantages when it comes to long-term growth.

To make a last-minute Traditional IRA contribution, you’ll need to establish an account with a qualified financial institution. This can be a bank, brokerage, or any financial institution that offers traditional IRA accounts. Be sure to consult with a financial advisor or tax professional to ensure you understand the regulations and rules surrounding Traditional IRAs.

Considering the approaching tax deadline and the potential benefits of a Traditional IRA, now could be the perfect time to make a last-minute contribution. By taking advantage of this tax-saving deduction, you not only reduce your current tax liability but also set yourself up for a more comfortable and secure retirement.

Remember, tax planning can be complex, and it’s always a good idea to consult with a qualified professional for personalized advice pertaining to your individual situation. Start exploring your options, and take advantage of last-minute tax-saving deductions – your future self will thank you!